Hyundai Motor Finance Co. v. McKay Motors I, LLC ( 2009 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
________________
No. 08-3214
________________
Hyundai Motor Finance *
Company, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Arkansas.
McKay Motors I, LLC; John P. *
McKay, Jr., *
*
Appellees. *
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Submitted: April 16, 2009
Filed: July 31, 2009
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Before WOLLMAN, MELLOY and GRUENDER, Circuit Judges.
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GRUENDER, Circuit Judge.
In this diversity action for breach of contract, the district court1 entered
judgment on a jury verdict in favor of Hyundai Motor Finance Company (“Hyundai
Finance”) against McKay Motors I, LLC (“McKay Motors”) and John P. McKay, Jr.
1
The Honorable William R. Wilson, Jr., United States District Judge for the
Eastern District of Arkansas.
Hyundai Finance appeals the district court’s denial of its post-verdict motion for
judgment as a matter of law concerning the amount of damages. For the following
reasons, we affirm.
I. BACKGROUND
In January 2005, McKay Motors entered into an inventory loan and security
agreement with Hyundai Finance, a so-called “captive finance company” for Hyundai
Motor America (“Hyundai Motor”), the distributor of Hyundai vehicles in the United
States. Hyundai Finance agreed to provide floor plan financing for McKay Motors’s
inventory of Hyundai vehicles. In turn, McKay Motors agreed to remit to Hyundai
Finance the amount of the outstanding advance on each vehicle that it sold. Hyundai
Finance took a security interest in the inventory and other collateral at McKay
Motors’s dealership. In the event that McKay Motors defaulted, Hyundai Finance was
authorized to take possession of the collateral and dispose of it by any commercially
reasonable means, including by selling certain types of vehicles to Hyundai Motor
under a separate repurchase agreement.
In July 2006, during a routine audit, Hyundai Finance discovered that McKay
Motors had sold vehicles “out of trust”—that is, without remitting the amount of the
outstanding advances on those vehicles to Hyundai Finance in a timely manner. As
of July 19, 2006, McKay Motors had an “SOT balance” of $228,000,2 meaning that
McKay Motors owed Hyundai Finance $228,000 for vehicles sold out of trust. On
that date, Hyundai Finance sent a letter to Mr. McKay, the namesake and guarantor
of McKay Motors, to inform him of the deficit and to demand immediate payment.
Hyundai Finance did not exercise its right to take possession of McKay Motors’s
inventory, nor did it take other steps to stop McKay Motors from doing business. Mr.
2
Monetary amounts are rounded to the nearest thousand dollars in accordance
with the convention adopted by the parties.
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McKay allegedly responded to Hyundai Finance’s initial demand by indicating that
he would need a loan to pay off the SOT balance due to a shortage of operating capital
at McKay Motors, among other things.
On September 8, 2006, Hyundai Finance sent a letter to McKay and Company,
LLC (“McKay and Company”), a separate entity managed by Mr. McKay, offering
a loan of $1.25 million. The proposed loan agreement was subject to numerous
conditions, including McKay Motors having $400,000 in cash on hand at the time of
closing to apply to its SOT balance and other outstanding debts with Hyundai Finance.
On September 13, 2006, Mr. McKay accepted the terms of Hyundai Finance’s
proposal. Over the next two months, however, this loan agreement unraveled. By
December, it was clear that the closing would not occur.
On December 20, 2006, Hyundai Finance filed this diversity action for breach
of the inventory loan and security agreement. As of that date, the SOT balance had
increased to $448,000. On January 9, 2007, the district court ordered McKay Motors
to deliver its inventory and the other collateral at the dealership to Hyundai Finance
for liquidation.
According to Hyundai Finance’s calculations, McKay Motors owed $1.36
million at the time Hyundai Finance took possession of the collateral. This amount
included the SOT balance ($448,000) and the principal due on forty-six vehicles
remaining in McKay Motors’s inventory ($911,000). Hyundai Motor repurchased
seventeen of those vehicles for $344,000 and Hyundai Finance sold the remaining
twenty-nine vehicles at auction for $383,000, which resulted in a total credit to
McKay Motors of $727,000. After accounting for additional fees and expenses as
well as the proceeds from the sale of other collateral, Hyundai Finance determined that
McKay Motors still owed $609,000 in principal and fees and $210,000 in interest, for
a total deficiency of $819,000.
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At trial, Hyundai Finance sought to recover damages in the amount of
$819,000. Although the jury found in favor of Hyundai Finance on its breach of
contract claim and rejected the defendants’ counterclaims, the jury found that the
amount of damages suffered by Hyundai Finance was $276,000. Hyundai Finance
then moved for judgment as a matter of law concerning the amount of damages,
arguing that the “uncontroverted evidence at trial established Hyundai’s damages to
be [$819,000], not the [$276,000] that the jury awarded.” The district court disagreed
on the merits.
The only issue presented in this appeal is whether the district court’s denial of
Hyundai Finance’s post-verdict motion for judgment as a matter of law was erroneous.
II. DISCUSSION
Rule 50(a)(2) of the Federal Rules of Civil Procedure provides that “[a] motion
for judgment as a matter of law may be made at any time before the case is submitted
to the jury” and “must specify the judgment sought and the law and facts that entitle
the movant to the judgment.” If the district court does not grant a motion for
judgment as a matter of law made before the case is submitted to the jury, Rule 50(b)
provides that “[n]o later than 10 days after the entry of judgment . . . the movant may
file a renewed motion for judgment as a matter of law and may include an alternative
or joint request for a new trial under Rule 59.”3
Ordinarily, we review de novo a district court’s denial of a post-verdict motion
for judgment as a matter of law, viewing the evidence in the light most favorable to
the verdict. Structural Polymer Group, Ltd. v. Zoltek Corp., 543 F.3d 987, 991 (8th
3
An amendment to Rule 50(b), scheduled to take effect on December 1, 2009,
substitutes “28 days” for “10 days.”
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Cir. 2008). But if a party fails to articulate with specificity the grounds for its pre-
verdict motion for judgment as a matter of law, then judgment as a matter of law “may
neither be granted by the district court nor upheld on appeal unless such a result is
‘required to prevent manifest injustice.’” Conseco Fin. Servicing Corp. v. N. Am.
Mortgage Co., 381 F.3d 811, 821 (8th Cir. 2004) (quoting Walsh v. Nat’l Computer
Sys., Inc., 332 F.3d 1150, 1158 (8th Cir. 2003)); see also Alternate Fuels, Inc. v.
Cabanas, 538 F.3d 969, 973 (8th Cir. 2008) (“[I]f the movant’s legal theories are not
articulated before the verdict, review is limited to whether the judgment sought is
required to prevent manifest injustice.” (internal quotation marks omitted)).
Moreover, we have consistently held that the grounds for a renewed motion for
judgment as a matter of law under Rule 50(b) are limited to those asserted in support
of the pre-verdict motion for judgment as a matter of law under Rule 50(a). See, e.g.,
Conseco, 381 F.3d at 821; Walsh, 332 F.3d at 1158. Thus, if a party fails to seek
judgment as a matter of law concerning the amount of damages before the case is
submitted to the jury, it may not raise the issue for the first time in a post-verdict
motion for judgment as a matter of law. See Day v. Toman, 266 F.3d 831, 837 (8th
Cir. 2001).
In this case, Hyundai Finance moved for judgment as a matter of law
concerning the amount of damages after the jury returned a verdict awarding about
one-third of the damages that Hyundai Finance sought. Hyundai Finance’s post-
verdict motion for judgment as a matter of law was not styled as the renewal of a pre-
verdict motion that had been denied or deferred. On appeal, Hyundai Finance has not
cited to or otherwise identified a pre-verdict motion for judgment as a matter of law
concerning the amount of damages.
Having examined the trial record independently, we located three instances in
which Hyundai Finance moved for judgment as a matter of law before the verdict.
Hyundai Finance first moved for judgment as a matter of law at the close of the
defendants’ case-in-chief. Hyundai Finance’s original motion failed to comply with
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Rule 50(a)(2) because counsel for Hyundai Finance did not specify the judgment
sought and did not set out any law or facts that entitled Hyundai Finance to the
judgment. As a result of these deficiencies, it is not possible to determine whether the
motion even related to Hyundai Finance’s claim for breach of contract—and in
particular, the amount of damages resulting from the alleged breach—rather than or
in addition to the defendants’ counterclaims. The district court denied the motion
without further comment.4
Hyundai Finance renewed its original motion at the close of all the evidence.
The renewed motion also failed to comply with Rule 50(a)(2) because counsel for
Hyundai Finance did not specify the judgment sought and did not set out any law or
facts that entitled Hyundai Finance to the judgment. This time, counsel referred to
punitive damages, which were part of the defendants’ counterclaims but were not
relevant to Hyundai Finance’s claim for actual damages stemming from the
defendants’ alleged breach of contract. The district court apparently deferred deciding
whether punitive damages could be awarded to the defendants and denied Hyundai
4
The discussion of Hyundai Finance’s original motion for judgment as a matter
of law was limited to the following:
The district court: I assume the counterdefendant moves for judgment
as a matter of law. I take it that you do?
Counsel for Hyundai Finance: Yes, sir.
The district court: Your motion is denied. Your exception is saved.
Counsel for Hyundai Finance: On all counts?
The district court: On each and every count.
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Finance’s renewed motion in all other respects.5 After the jury retired to deliberate,
5
The discussion of Hyundai Finance’s renewed motion for judgment as a matter
of law was limited to the following:
The district court: All right. Motion by McKay for judgment as a
matter of law renewed?
Counsel for defendants: Renewed.
The district court: All right. Overruled; exception saved.
Counsel for Hyundai Finance: Same here, Your Honor. Renewed on
behalf of Hyundai and Hyundai
Motors.
The district court: Exception saved.
....
Counsel for Hyundai Finance: Including as to punitive damages, et
cetera.
The district court: What about punitive damages?
Counsel for Hyundai Finance: Your Honor, there’s no evidence that
would suggest—
The district court: Let me hear from them. I’m inclined to think there’s
not an issue of punitive damages.
....
The district court: Over their objection, I’m going to let it go to the
jury. If the jury returns with a punitive damage
verdict, . . . I’ll be happy to revisit the issue.
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the district court said that it would treat all motions for judgment as a matter of law
“as being remade here and now” but summarily denied the renewed motions without
eliciting additional argument from the parties.
At oral argument before this court, counsel for Hyundai Finance conceded,
albeit with some equivocation, that the original and renewed pre-verdict motions for
judgment as a matter of law did not deal with the amount of damages “distinctly” or
“as a separate issue.” Nevertheless, counsel argued that because Hyundai Finance’s
only claim was for $819,000, the motions “implicitly” sought judgment as a matter
of law in that amount.
Although “technical precision” in stating the grounds for a motion for judgment
of a matter of law is not necessary, the motion must be “specific enough” to notify the
district court and the opposing party of the underlying issue. Alternate Fuels, 538
F.3d at 973 (citing Conseco, 381 F.3d at 821). Hyundai Finance’s pre-verdict motions
did not specifically demand judgment as a matter of law concerning the exact amount
of damages that Hyundai Finance sought for the defendants’ alleged breach of
contract. To be sure, we have recognized that a colloquy between counsel and the
district court may “flesh[] out” a skeletal motion for judgment as a matter of law and
thereby provide the required notice. See Conseco, 381 F.3d at 821. But the cursory
discussion surrounding Hyundai Finance’s pre-verdict motions did not do so. There
is simply no indication that the district court and the defendants were aware of
Hyundai Finance’s theory that the amount of damages was uncontested and therefore
should have been decided as a matter of law. On the contrary, counsel for Hyundai
Finance assented to “Closing Instruction No. 34,” which provided that it was the
jury’s task to determine “[w]hether [the] element of damage has been proved by the
evidence,” and if so, “[to] fix the amount of money that will reasonably and fairly
Counsel for Hyundai Finance: Thank you, Your Honor.
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compensate Hyundai Finance for the element of damage sustained.”6 If the amount
of damages was in fact uncontested, Hyundai Finance should have moved for the
district court to decide that issue as a matter of law before the case was submitted to
the jury. Cf. Douglas County Bank & Trust Co. v. United Fin. Inc., 207 F.3d 473,
477-78 (8th Cir. 2000) (rejecting a proposed exception to Rule 50 for cases involving
“an award of damages smaller than anticipated,” based in part on the premise that the
disappointed plaintiff “could have filed a Rule 50 motion at the close of all the
evidence—and before the jury retired—alleging that there was no evidentiary basis
for the jury to conclude that the damages were less than [a specified amount]”).
To the extent we may consider the merits of Hyundai Finance’s appeal, we
conclude that the denial of judgment as a matter of law concerning the amount of
damages does not constitute a manifest injustice. See Conseco, 381 F.3d at 821; see
also Alternate Fuels, 538 F.3d at 973. The district court’s instruction regarding the
calculation of damages provided that “[i]n order to fairly compensate Hyundai
Finance, any award should put Hyundai Finance in no better position than it would
have been in if Hyundai Finance and John McKay and McKay Motors had performed
all of their promises under the inventory loan and security agreement.” Viewed in the
light most favorable to the verdict, the record contains sufficient evidence to support
a finding that $276,000 was adequate to fairly compensate Hyundai Finance for its
damages. See Conseco, 381 F.3d at 822 (holding that because the appellant failed to
comply with Rule 50, “our review is limited to ‘whether the record reflects an absolute
dearth of evidentiary support for the jury’s verdict.’” (quoting Zachar v. Lee, 363 F.3d
70, 74 (1st Cir. 2004))).
6
Arkansas follows the general rule that “[t]he amount of damages to be awarded
for breach of contract . . . is ordinarily a question for the jury.” Erhart v. Hummonds,
334 S.W.2d 869, 873 (Ark. 1960) (quoting Sinclair Ref. Co. v. Fuller, 79 S.W.2d 736,
740 (Ark. 1935)).
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As of July 19, 2006, the SOT balance was $228,000. McKay Motors’s failure
to remit that amount to Hyundai Finance placed McKay Motors in default and
authorized Hyundai Finance to take immediate possession of McKay Motors’s
inventory and the other collateral. Yet Hyundai Finance allowed McKay Motors to
continue operating until January 2007. Indeed, Hyundai Finance sought to keep
McKay Motors in business by offering to loan $1.25 million to McKay and Company.
The defendants introduced evidence showing that as of August 10, 2006, Mr.
McKay had more than $423,000 deposited in an account with the Bank of Little Rock,
which the defendants argue could have been used to pay off the original SOT balance.
In addition, the defendants elicited three particularly relevant pieces of testimony from
Sam Frobe, the national manager of commercial credit for Hyundai Finance. First,
Frobe stated that he did not demand immediate payment of the SOT balance between
September 8, 2006, and December 14, 2006, because Hyundai Finance was “trying
to work with Mr. McKay.” Second, Frobe agreed that if the proposed $1.25 million
loan had closed on time, “all of this would have been resolved.” Third, Frobe
conceded that he did not recall certain details about the manner in which Hyundai
Finance disposed of the forty-six vehicles in McKay Motors’s inventory.
A reasonable juror could find that $276,000 was enough to compensate
Hyundai Finance for the original SOT balance of $228,000 plus interest and at least
some of the deficiency from the sale of the dealership’s inventory and collateral.
Next, a reasonable juror could find that the increase in the SOT balance from
$228,000 to $448,000 was attributable to either Hyundai Finance’s decision to allow
McKay Motors to continue operating until January 2007, Hyundai Finance’s refusal
to close on the loan agreement that would have kept McKay Motors afloat, or both.
A reasonable juror could then find that Hyundai Finance proved that it disposed of
some but not all of the collateral in a commercially reasonable manner and that it was
entitled to recover some but not all of the assorted fees and expenses that it claimed.
Based on these findings, a reasonable juror could conclude that an award of more than
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$276,000 would put Hyundai Finance in a better position than it would have occupied
if the parties had performed all of their promises under the inventory loan and security
agreement. In short, Hyundai Finance has not shown “an absolute dearth of
evidentiary support for the jury’s verdict.” See Conseco, 381 F.3d at 822 (quoting
Zachar, 363 F.3d at 74). Accordingly, we are not convinced that judgment as a matter
of law must be granted to Hyundai Finance to prevent a manifest injustice.7
III. CONCLUSION
For the foregoing reasons, we affirm the district court’s denial of Hyundai
Finance’s post-verdict motion for judgment as a matter of law.
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7
Hyundai Finance did not move in the alternative for a new trial on the issue of
damages and at oral argument counsel for Hyundai Finance expressly disclaimed any
interest in pursuing such relief.
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